May 17, 2011

FCPA: Johnson and Johnson to Pay $70 Million in Fines on International Orthopedic Subsidiary

Johnson & Johnson recently announced that it will pay $70 million as part of a deferred prosecution agreement (DPA) with the Department of Justice (DOJ) to resolve improper payments by J&J subsidiaries to government officials in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act (FCPA). According to an article from the RxCompliance Report, the charges included “bribing doctors at state-run hospitals to prescribe its products.”

A criminal information, filed in U.S. District Court in the District of Columbia in connection with the DPA, charges J&J subsidiary DePuy Inc. with conspiracy and violations of the FCPA in connection with the payments to public physicians in Greece.

The article noted that in 2007, J&J voluntarily disclosed to the DOJ and the Securities and Exchange Commission (SEC) that “subsidiaries outside the United States were believed to have made improper payments in connection with the sale of medical devices.”

J&J assumed responsibility for the actions of its subsidiaries, employees and agents who made various improper payments to publicly-employed health care providers in Greece, Poland and Romania in order to induce the purchase of medical devices and pharmaceuticals manufactured by J&J subsidiaries.

The SEC’s complaint alleges that since at least 1998 and continuing to early 2006, “J&J’s subsidiaries, employees and agents paid bribes to public doctors in Greece who selected J&J surgical equipment for their patients. Further, J&J’s subsidiaries and agents paid bribes to doctors and public hospital administrators in Poland who awarded tenders to J&J from 2000 to 2006. J&J’s subsidiaries and agents also paid bribes to public doctors in Romania to prescribe J&J pharmaceutical products from 2002 to 2007.”

The DOJ noted that J&J will be required to report to the department on implementation of its remediation and enhanced compliance efforts every six months for the duration of the agreement. The company will not have to retain a corporate monitor due to their “pre-existing compliance and ethics programs, extensive remediation, and improvement of its compliance systems and internal controls, as well as the enhanced compliance undertakings included in the agreement.”

J&J said it hopes to reach a settlement of a related investigation by the U.K. Serious Fraud Office (SFO) in several days. According to the Justice Department, J&J cooperated extensively with the government and, as a result, has played an important role in identifying improper practices in the life sciences industry.

Principal Deputy Assistant Attorney General, Mythili Raman, of the Justice Department’s Criminal Division, asserted that the J&J agreement reflects DOJ’s commitment “to holding corporations accountable for bribing foreign officials while, at the same time, giving meaningful credit to companies that self-report and cooperate with our investigations.” Consequently, this case echoes recent promises from the DOJ who promised to increase enforcement of such actions under the FCPA.